Global Economics

Indian IT Workers Face Slower Wage Growth

March 21, 2008

The dream may be over. Tech workers can expect to see only 8% to 12% salary increases this year instead of the 16% to 20% they've had in the past

The great Indian IT dream job has probably lost its cult status. In line with the depressed market conditions and fears of business contraction, wage hikes in IT jobs are expected to be lukewarm, industry sources say.

The Indian IT services industry, which was witnessing an average annual wage hike in the range of 16%-20%, is likely to see a compensation increase in the range of 8%-12%. If this happens, it would be the second time in eight years that the industry will see a dip in wage growth rate. The last time when the industry saw lower growth rate in wages was during the dotcom bust in 2001-2002 period.

IT jobs, in its golden era, were attractive not just for the fabulous pay package but also stock options, which made many millionaires. Now the scenario is quite different. A recent survey by Hewitt Associates showed that in 2007 the real estate sector led the list with highest salary increase, leaving traditional leaders like IT and BPO way behind.

With the announcement of fourth quarter results next month, industry majors like TCS and Infosys are expected to set the tone on wages for the coming fiscal.

Although there is no firm decision yet, it is expected that increments could breach the sub-10% barrier or be in the very low double-digit range at the very best, according to industry sources.

The moderate wage outlook will perhaps not come as a surprise with the IT services industry battling on various fronts like recessionary trends in its key market in the US, volatile currency and HR challenges like attrition and lack of industry-ready talent.

Large companies have been reporting a steady involuntary attrition level, translating into a few hundred employees every year. In fact, companies have been talking tough and job losses on performance parameters are not so uncommon anymore.

TCS had recently announced minor cuts in its variable pay, a move that is being seen as a sign of things to come. The current scenario could also be a blessing in disguise for the industry. A study by neoIT titled 'Redistribution of global arbitrage' said, "The current rate of wage inflation in India is unsustainable.... these increases (can) quickly price India out of the global market."

Typically, increment levels for onsite and offsite employees are different. Industry observers say, while the average wage hikes may be 10% or thereabouts, there would be spikes based on parameters like skillsets, performance and experience. Salaries at the base of the pyramid would be higher compared to layers above.